Thursday, September 13, 2012

Rebuilding After You've Filed for Bankruptcy

There are few experiences as traumatic and stressful as declaring bankruptcy. However, bankruptcy is not the end of your financial life; it can also be a new beginning. Though a bankruptcy can result in a bad mark on your credit report, it can also provide the opportunity to rebuild your credit and financial health. Using these steps, you can start anew after bankruptcy and secure for yourself a healthy financial future.

Evaluate How You Got into Bankruptcy

There are many reasons that can cause an individual to declare bankruptcy. Some financial issues might be out of your control, such as medical bills, law suits, layoffs, or divorce. But there other factors that can lead you to bankruptcy or make you more susceptible to bankruptcy that can be managed. You might have to ask yourself some tough questions as you evaluate your path to bankruptcy. Maybe credit card companies seduced you with the promise of easy credit, but then hit you with high interest rates. With the enticement of credit cards and their "easy monthly payments" you can very quickly find yourself in big financial trouble.

Another cause of bankruptcy can be a lack of emergency savings. Many folks fail to create a financial plan that includes setting aside a percentage of their income that can be accessed in the event of a layoff or emergency. Some people get in trouble by buying more house than they can afford, and when a financial crisis occurs, find themselves burdened with a mortgage payment larger than their income. Whatever the cause, take some time to evaluate what happened, and see if there are any steps you can take to avoid problems of the past.

Make a Spending Plan

A spending plan is simply deciding what you are going to do with your money before spending it. By writing down your income and expenses, you can get an idea of where your money is going. That way, you can decide ahead of time whether to go out to lunch or bring it to work with you. On one hand, a spending plan gives you the ability to say "No" to buying something you don't need. On the other hand, a spending plan also gives you the freedom to buy something guilt-free because you know you have the money to make the purchase. And don't forget, when you cash your paycheck, the first person you should pay is yourself. The old adage of saving money for a rainy day has a lot of truth to it. Setting aside a percentage of your pay in a "Just in case" account is a simple and affordable means to be prepared. Bad things happen to good people. And it might have been unexpected expenses that caused your bankruptcy. However, an emergency fund just might help mitigate some of the effects of future emergencies or setbacks.

Rebuild Your Credit

It is no secret that bankruptcy is a black mark on your credit report. But credit scores can be rebuilt. And it is important for your financial future to repair your credit. After you have made your spending plan and know that you can live by it, consider getting a secured credit card. This is a card that is secured by a cash deposit you make. Even though a credit card can get you into trouble, it can also be a tool to improve your credit score. By using this secured card to make small purchases and paying off the balance every month, you will show that you are a good credit risk, and your credit score will start to rise. Even if you plan to never borrow another dollar, you need a good credit score. Your credit score affects things such as your insurance rates, whether you can get a cellular phone, and rental applications.

Ask a Bankruptcy Attorney

As you go through the process of your bankruptcy, speak with your bankruptcy attorney about resources that you can use to get a fresh start.

There are organizations in Mankato, Minnesota that can help you with secure your financial future.

6 comments:

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